12/23/08 FAIRFIELD GREENWICH INVESTORS: WHERE DID ALL THE MONEY GO? (Updated)

Fairfield Greenwich Investors Say:

Show Us The Money

It has become the biggest mystery to emerge from the $50 billion Bernard Madoff scandal:

Where did the money go?

Federal investigators are likely to take months trying to answer Fairfield Greenwich Investor's questions as they dig through the disgraced ponzie schemer's records and attempt to unravel what may be the biggest financial fraud in history.

But several theories are being discussed among financial experts and at Greenwich hedge fund watercoolers, the town's Country clubs and the offices of local accounting professionals.

Among the theories: Madoff lost a bundle in bad investments; paid some of the money out to investors; stashed cash in foreign banks; and spent some on his lavish lifestyle. There is also the possibility he inflated his claim of $50 billion in losses.

Fairfield Greenwich Investors, who lost money with Greenwich resident Walter Noel, say that Madoff has plenty of houses and yachts, but not certainly enough to account for all this money.

It is tough if not impossible to really lose 100 % of the $50 Billion.

Bernard Madoff, 70, a former Nasdaq stock market chairman, has become one of the most vilified people in America since news broke Dec. 11 that he allegedly had been running a giant Ponzi scheme, paying returns to certain investors out of the principal received from others.

So far, investors have said that they have lost more than $30 billion, according to an Associated Press calculations.

Here are some possible scenarios:

TRADED AWAY: What's unclear at this point of the investigation is when the scheme began, but reports have indicated that it had been going on for decades. In the criminal complaint against Madoff, he told investigators that he "had personally traded and lost money for institutional clients, and that it was all his fault."

That suggests he may have blown investors' money through a failed trading strategy, and at some point felt compelled to cover up the mistakes.

LOST IN THE FINANCIAL MELTDOWN: Madoff's scheme was partly undone by this year's crisis in the stock and credit markets. The Dow has lost nearly 36 percent since the start of this year, and the credit market has largely been frozen.

In the complaint, Madoff said that investors were seeking approximately $7 billion in redemptions. Madoff boasted of producing returns of about 10 percent for years, so individual investors who were getting battered in other parts of their portfolio might have taken some of those purported Madoff profits off the table.

At the same time, hedge funds were facing an unprecedented run on redemptions from their own investors. That meant the hedge funds may have had to quickly extract cash from their Madoff positions in order to pay their own investors back.

UPDATE:

HE MADOFF WITH $49 BILLION

New York Post, NY - Jan 10, 2009

By LUKAS I. ALPERT and BRUCE GOLDING

Of the $50 billion Bernard Madoff swindled, investigators have been able to uncover only about $1 billion in remaining assets.

If the number holds, that means the recovery of money from his massive Ponzi scheme may total only 2 percent of what his victims gave him.

So far, the trustee liquidating Madoff's firm has found $830 million in liquid assets. When the value of Madoff's real-estate holdings, boats, jewelry and other property is factored in, the figure rises to approximately $1 billion, according to Bloomberg News.

Madoff coughed up a list of his holdings when prosecutors demanded he be jailed without bail after he tried to send $1 million in jewelry to family and friends.

US Magistrate Judge Ronald Ellis yesterday considered arguments on whether Madoff, 70, should be allowed to remain under house arrest at his swanky East Side penthouse or be thrown in jail.

Ellis is set to deliver his ruling Monday at noon, officials said.

Prosecutors also received a 30-day extension yesterday to indict the alleged scammer after reaching a deal with the defense team.

The list of Madoff's alleged victims include some of the world's wealthiest people and the most sophisticated investment funds. One of his most high-profile victims, Hollywood mogul Jeffrey Katzenberg, called the swindle "extremely painful and humiliating for me."

"It has done extraordinary damage to my philanthropy," he told CNBC.

Katzenberg, who runs Dreamworks Animation, would not say how much money he lost, but the Los Angeles Times has reported it was at least $20 million.

Katzenberg, 58, had his funds invested with Madoff through his business manager, Gerald Breslauer, the LA Times reported.

"The first time I heard the name Bernie Madoff was about three weeks ago, when I found out that, you know, he had swindled all this money," Katzenberg said.

In other developments, a Massachusetts-based hedge fund, GMB Capital Management, said it was shutting down a fund that was bilked out of more than $50 million by Madoff.

Also, investigators in Britain were trying to determine whether Madoff embezzled $150 million from his company's operation there.

And Austria's Bank Medici, which may have invested as much as $3 billion with Madoff, announced it was restructuring its board of directors and business strategy following the massive swindle.

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